The Irish Independent reports that borrowing costs for the embattled Greek government and other peripheral eurozone countries rose yesterday amid fears that the status of Greek debt might fall below levels accepted by the European Central Bank (ECB) for lending to the banking system.

The cost of insuring Greek debt against default rose by almost 0.13pc (13 basis points); taking the cost of insuring €10m of debt exposure to more than €390,600. The equivalent Irish and Spanish spreads moved up by four and five basis points. The new fears came after rating agency Moody's said it may reduce its A2 grade on Greek debt in a few months. Two cuts in its credit rating to the same level as the other major ratings companies could mean Greek government bonds were no longer eligible as collateral for bank borrowings from the ECB, making it even more difficult for the government to borrow and the banks to fund their operations.

Moody's did say a cut was conditional on the efforts of the Greek government. "We have to let the government implement its plans. You can't expect a government to be able to turn around public finances in a few days," Pierre Cailleteau, managing director of sovereign risk at Moody's, said.

The ratings firm Standard & Poor's, which has a lower rating on Greece, said earlier that it may cut that BBB+ rating "one or two notches" by the end of March.

"The rating could be pressured by lower profitability at the country's banks or a decline in public support for the budget plan," it said.

US Fed chief Ben Bernanke said the Fed was looking into the use by investment bank Goldman Sachs and other Wall Street firms of financial instruments such as credit default swaps to make bets that Greece will default on its debt.

"Obviously, using these instruments in a way that intentionally destabilises a company or a country is counterproductive,"Mr Bernanke said.

Other parts of Goldman are under fire for helping reduce the apparent size of Greek debt.

The Irish Independent also reports that the Financial Regulator is probing allegations that some overseas brokers have been allowing customers to 'short' Irish bank shares despite a ban on such activity.

Short-selling is a trading strategy -- beloved by hedge funds -- where investors can profit from falling stocks.

However, such trading in Irish bank stocks has been banned by the watchdog since the financial crisis went into overdrive in September 2008.

The ban remains in place even though other authorities such as the UK Financial Services Authority have relaxed their curbs.

The Irish Independent understands the regulator was contacted in the past week about one European trading platform offering short-selling trades on Irish bank shares through a financial product called contracts for difference (CFDs).

Providers of these instruments allow investors to place bets on assets increasing or falling in value. The purchaser doesn't actually own the shares.

In a statement, the regulator said: "All brokers, including those based outside of Ireland, must maintain a sustained awareness of the continuing requirement to refuse to execute transactions with persons aiming to short sell Irish bank shares."

It also reaffirmed that the ban on short-selling remained in place.

Another common way for an investor to 'short' a stock is to borrow shares in a company and sell them in the market in the hope that the price will fall.

Profit

The investor can then buy the shares back and return them to their original owners -- pocketing the difference as profit.

Market participants have also noted that trading volumes in Allied Irish Banks' American depository receipts (ADRs) in New York, for instance, has been higher so far this year than the amount of shares changing hands in Dublin. ADRs are used to trade ownership in shares of a foreign company trading in the US.

Bank of Ireland's ADRs are sometimes more heavily traded than its Dublin stock.

Some senior market players have also suspected on occasions in recent months that short-selling has been going on abroad in Irish banks.

They have also noted trading patterns that are often linked to a 'short squeeze' -- when short-sellers rush to close their positions to cut their losses if a stock rises unexpectedly. This, in turn, often propels the stock even higher.

But none of the banks themselves have reported any such strange activity in their shares.

The Irish Times reports that the first inquiry into the Irish banking crisis will name institutions that may have been at fault, but will stop short of blaming individuals.

An Oireachtas committee heard yesterday that the preliminary inquiry, led by German economics expert Klaus Regling, would begin next week. Mr Regling said he would examine the “root causes” of the banking collapse and report to Minister for Finance, Brian Lenihan, before the end of May.

Addressing the Joint Committee on Finance and the Public Service, Mr Regling said that while he and his assistant Max Watson would not have sufficient time to “look at all banking transactions in the past 10 years”, they may want to examine “some very important individual transactions”.

“I’m sure we will identify some failures,” said Mr Regling, describing his brief as establishing what went wrong and identifying problems in the system that may have caused the crisis. When asked if they would name institutions in their report, his colleague Mr Watson replied, “Well yes, I think so.”

He said they would not identify individuals but acknowledged that it may be possible to make “inferences” from the report’s conclusions.

The experts, both of whom have extensive international experience in bodies such as the International Monetary Fund and the European Commission and were appointed by Mr Lenihan, will hold their first meetings with domestic sources next week.

Mr Regling said they would make contact with the “relevant public and private sector bodies”. These will include the Central Bank, the Financial Regulator, research institutions, trade union and consumer representatives.

Speaking after the committee concluded its business, Mr Watson indicated they had yet to decide whether or not to meet former bank chief executives as part of their work. The chief executives of AIB, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent and Irish Nationwide have all changed since the banking sector almost collapsed in 2008.

“We’ll talk to whoever we need to,” said Mr Watson. He told the committee that former ministers for finance and Central Bank governors may fall into this group.

Outside the Republic, the two men will hold a series of meetings with “key international bodies” including the European Commission, the European Central Bank, the Bank for International Settlements and the IMF. Mr Regling confirmed his team’s report would be completed by May and published subsequently.

Another report will be drawn up by the governor of the Central Bank, Patrick Honohan, at the same time. Both reports will then feed into a statutory commission of inquiry in the second half of this year.

The mandate supplied to Mr Regling and Mr Watson limits their inquiry to the period before the end of September 2008, when the Government guaranteed deposits held by Irish banks. It will thus not consider the nationalisation of Anglo Irish Bank, the bailouts of AIB and Bank of Ireland, or Nama.

Fine Gael’s finance spokesman, Richard Bruton, described the banking crisis as “a very deep regulatory failure” and a “bog-standard property bubble”, while his Labour counterpart, Joan Burton, highlighted “many warnings” that were not taken seriously.

Ms Burton described the two men as “two angels on our shoulder”, suggesting they came with “a certain imprint” from the IMF. The charge was rejected by Mr Regling, who said, “for the record, we’re not representing anybody here”.

“We feel very independent,” said Mr Regling, adding that there would be “no secrecy”.

Meanwhile, the Government has announced the membership of an expert committee to give recommendations on ways to help people in debt or mortgage arrears.

Minister for Finance Brian Lenihan said:“This is a committee where we want a realistic engagement between the banks, the Government, the various other interested parties for finding solutions for people.”

The Irish Times also reports that the European Commission says Europe’s economies face headwinds as they move out of the EU’s deepest recession, warning in a new forecast that the nascent recovery remains “fragile” and has yet to be tested.

Despite the financial emergency in Greece and rising concerns about the weak position of the Spanish and Portuguese economies, the EU executive left unchanged at 0.7 per cent its projection of likely growth this year in both the euro zone and the union at large.

Economics commissioner Olli Rehn said uncertainty over the forecast was rife, stating that recent turbulence in financial markets illustrated the high uncertainty that surrounded projections in the current scenario.

The commission expects the euro zone inflation rate to be 1.1 per cent this year, well beneath the European Central Bank’s target rate of just under 2 per cent.

The forecast comprises the commission’s assessment of the seven largest countries in the union: Germany, Spain, France, Italy, the Netherlands, Poland and Britain, which represent 80 per cent of the union’s overall economy.

As a result, it makes no comment on the performance of smaller countries such as Ireland. The commission’s next forecast for Ireland comes early in May, more than four months after Minister for Finance Brian Lenihan introduced his swingeing budget.

The commission said exports were sustaining growth in Germany, motor of the European economy, and said Britain was emerging “with little momentum” from recession. Poland was front-runner in the recovery phase.

Presenting his first official projections since he assumed the economics portfolio a fortnight ago, Mr Rehn said the consolidation of public finances was crucial to Europe’s recovery prospects.

The fact that European industrial production lagged far behind Asian and other economies was a concern, adding that the “crux” of Europe’s dilemma was the requirement to boost investment in innovation and education while seeking to stabilise public finances.

Improved sentiment indicators pointed to an expansion of activity in the future, it said, but “hard data” – in the industrial production and retails particularly – were less encouraging.

The Irish Examiner reports that overdrafts and student loans are among those about to be hit by increased Bank of Ireland interest rates.

The bank, in which the taxpayer received a 16% stake this week, yesterday announced a spectrum of lending rate increases on personal loans.

Bank of Ireland said it will raise the interest rate it charges its customers on overdrafts, personal loans and student loans.

The bank will also cut the interest it pays to customers who keep their current accounts in the black. Bank of Ireland has more current accounts than any other bank, with a 38% market share.

Earlier this week, the state ended up with 16% of BoI after the bank was blocked by the EU Commission from paying a €250 million dividend to the exchequer in return for €3.5 billion of taxpayers’ money which had been injected in the bank last year.

• The bank will increase the interest rate it charges personal customers for an overdraft from 13.7% to 14.8%, including the €25 fee for setting up an overdraft.
• Account holders who overdraw without approval will pay an additional penalty interest rate charge of 7.2%, bringing the total interest on an unauthorised overdraft to 22%. The new higher rates will take effect from April 28.
• The bank also increased personal loan rates, from 12.4% to 13.5%. For amounts of €10,000, the rate rise is lower.
• The third-level student loan and overdraft rates will both rise from 10.8% to 11.9%, while the graduate loan and overdraft rates will go up from 8.7% to 9.7%.

Sinn Féin’s Arthur Morgan said the increases will have a detrimental effect on people and businesses. He said it highlighted the need to nationalise the two main banks and form a state bank.

Bank of Ireland’s decision will put more pressure on already hard-pressed consumers, Fine Gael deputy finance spokesman Kieran O’Donnell TD warned. "Bank of Ireland should get its own house in order by cutting costs before it starts penalising customers," he said.

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The New York Times says if there was any question about how deeply divided Republicans and Democrats are about how to reshape the American health care system, consider that they spent the first few hours of President Obama’s much-anticipated health care forum on Thursday arguing over whether they were in fact deeply divided.

The forum played out with Mr. Obama serving as moderator, M.C. and chief defender of Democratic policy prescriptions. He and his fellow Democrats tried to make the case that the two parties were closer than they thought, with the implication that their bill was centrist and would be acceptable to mainstream voters. Republicans countered that the gap was vast, the bill out of touch with what the country wanted, and that Mr. Obama should throw it out and start over. “A dangerous experiment,” warned Representative John A. Boehner of Ohio, the House Republican leader.

By day’s end, it seemed clear that the all-day televised session might have driven the parties even farther apart. Republicans said there was no way they would vote for Mr. Obama’s bill, and Democrats were talking openly about pushing it through Congress on a simple majority vote using a controversial parliamentary maneuver known as reconciliation.

As he wrapped up the session, Mr. Obama chided Republicans for advocating “baby steps” and rejected their call to start over, declaring Americans “don’t want us to wait.” He said that if he did not see any significant movement toward bipartisan cooperation, Democrats would push ahead on their own and leave it to voters to render their judgment.

“That’s what elections are for,”the president said.

The forum, at Blair House across the street from the White House, was in many respects an extraordinary sight — the president, with Vice President Joseph R. Biden Jr. at his side, engaging in a spirited and detailed policy debate with Republicans about one of the most compelling and ideologically polarizing issues facing the nation.

Mr. Obama’s mastery of the intricacies of health policy was impressive even to some Republicans.

“It was sort of his classroom,” Senator Lamar Alexander, the Tennessee Republican who delivered his party’s opening statement, said in an interview. “I was glad we did it, because the president’s megaphone is the biggest one and when he shares it with Republicans like he did, that gives us several hours to make our case, and I thought we made it well.”

The session did produce hints of potential agreement on some issues, but in each case Democrats and Republicans differed over important details.

They agreed on the need for more regulation of insurers, for example, but clashed over the question of whether the federal government should replace states as the primary regulator. They agreed that the federal government should help individuals and small businesses pool their purchasing power to buy insurance, but disagreed over whether the government should specify minimum benefits, as Democrats proposed.

Beyond the question of government intervention in the private insurance market, their most profound disagreement was over expanding coverage to the uninsured. The Democrats want to cover more than 30 million people over 10 years; Republicans said the nation could not even afford the entitlement programs, like Medicare, that already exist, much less start new ones.

Amid the debate over insurance industry regulation, cost containment, medical malpractice lawsuits and other minutiae of health policy, there were also plenty of theatrics. At one point, Senator Mitch McConnell of Kentucky, the Republican leader, chastised Mr. Obama for allowing Democrats to run on, saying Republicans had spoken for 24 minutes while Democrats had had 52. (Republicans kept track of the dialogue; at the end of the day, they said Mr. Obama had spoken for 119 minutes, Democrats 114 and Republicans 110.)

At another point, Mr. Obama looked wryly at Representative Eric Cantor of Virginia, the Republican whip, who addressed the president with a stack of papers in front of him. “Let me just guess,” Mr. Obama said, barely containing his smirk, “that’s the 2,400-page bill.”

But the biggest clash of the day involved Mr. Obama’s 2008 Republican rival, Senator John McCain of Arizona. Reminding Mr. Obama that both of them had run for office “promising change in Washington,” Mr. McCain delivered a lengthy talk deriding the Democrats’ bill as being produced “behind closed doors” and stuffed with “unsavory deal-making.”

Mr. Obama finally tried to cut the senator off. “We’re not campaigning anymore,” the president said.“The election is over.”

Mr. McCain laughed and shot back:“I’m reminded of that every day.”

Later, though, Mr. Obama credited Mr. McCain with making a valid argument in a discussion over federal payments to private Medicare Advantage plans.

Mr. McCain criticized a provision of the Senate bill that would carve out special protections for people enrolled in the plans in Florida and a few other states, while people in his own state of Arizona would not benefit. The president called it a “legitimate point.”

Throughout the day, Mr. Obama skirmished with Republicans over the effects of the Democrats’ proposal on health insurance premiums. Republicans, citing a Congressional Budget Office analysis of the Senate bill, said the average premium for individual policies would be about 10 percent to 13 percent higher in 2016 than the average premium that year under current law.

Mr. Obama countered that under the Senate bill, the federal government would establish standards for “decent insurance,” and that the better benefits might be more costly. And in any event, most people buying individual policies would qualify for federal subsidies, which would substantially lower what they pay.

One of the sharpest areas of philosophical disagreement between Mr. Obama and the Republicans emerged when Senator John Barrasso, the Wyoming Republican who is also an orthopedic surgeon, contended that Americans would make better, less costly health care choices if they had catastrophic insurance coverage that required them to pay for most services out of pocket.

Mr. Obama asked if he would prefer that members of Congress have only catastrophic coverage; the senator said he would. “That’s right, because members of Congress make $176,000 a year,” Mr. Obama replied, adding that he wondered whether Mr. Barrasso would feel the same way if he earned only $40,000.

For the president, Thursday’s session was a kind of Hail Mary pass, a last-ditch effort to keep his top legislative priority from slipping out of his grasp.

He opened the session by calling on the two parties to search for common ground and implored them to“make sure that this discussion is actually a discussion and not just us trading talking points.”

Mr. Obama said he found considerable overlap in the two parties’ ideas, and Democrats like Senator Max Baucus of Montana, a chief author of the bill, spent much of their morning trying to back up that assertion.

Sounding optimistic, Mr. Baucus said, “We are on the verge and the cusp, with not too much effort, to try to bridge a lot of gaps here.”

The NYT also reports that the Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan.

By altering how it awards $500 billion in contracts each year, the government would disqualify more companies with labor, environmental or other violations and give an edge to companies that offer better levels of pay, health coverage, pensions and other benefits, the officials said.

Because nearly one in four workers is employed by companies that have contracts with the federal government, administration officials see the plan as a way to shape social policy and lift more families into the middle class. It would affect contracts like those awarded to make Army uniforms, clean federal buildings and mow lawns at military bases.

Although the details are still being worked out, the outline of the plan is drawing fierce opposition from business groups and Republican lawmakers. They see it as a gift to organized labor and say it would drive up costs for the government in the face of a $1.3 trillion budget deficit.

“I’m suspicious of what the end goals are,” said Ben Brubeck, director of labor and federal procurement for Associated Builders and Contractors, which represents 25,000 construction-related companies. “It’s pretty clear the agenda is to give big labor an advantage in federal contracts.”

Critics also said the policy would put small businesses, many of which do not provide rich benefits, at a disadvantage. Furthermore, government officials would find it difficult to evaluate bidders using the new criteria and to determine whether one company’s compensation package should give it an edge, said Alan L. Chvotkin, executive vice president of the Professional Services Council, a coalition of 340 government contractors.

From his earliest days in office, President Obama has called for an overhaul of government procurement policy, citing the contracting scandals of the previous decade involving cost overruns and no-bid contracts.

“The president made it clear that he is committed to reforming government contracts to save taxpayers money while protecting workers and the environment,”a White House spokesman, Bill Burton, said. “The administration is currently gathering data and examining the best ways to do this.”

Two of Mr. Obama’s allies — John Podesta, the Clinton administration chief of staff who headed the president’s transition team, and Andy Stern, president of the Service Employees International Union — have repeatedly pressed the president to use procurement policy to push up wages and benefits.

In testimony last year to the Office of Management and Budget, Mr. Podesta said that 400,000 workers employed under federal contracts — like cafeteria workers, security guards and landscaping workers at federal buildings — earn less than $22,000 a year, the federal poverty line for a family of four, assuming just one paycheck in a household.

“We have a president who is talking about bringing more people into the middle class,” Mr. Stern said. “The government should expect contractors to obey the law, and at the same time contractors should not be building a poverty economy, but should be trying to build a high-road economy.”

The officials briefed on the plan said it was being developed by officials in the Office of Management and Budget, the White House Office of Legal Counsel, the Treasury, Justice and Labor Departments and the vice president’s Middle Class Task Force.

Even as business groups press the administration for more details, they are denouncing the plan, tentatively named the High Road Procurement Policy.

The Daily Caller, a conservative Web site, reported Feb. 4 that the plan would “heavily favor government contractors that implement policies designed by organized labor.”

Randel K. Johnson, senior vice president for labor at the United States Chamber of Commerce, called the plan a “warmed-over version” of President Bill Clinton’s regulations that sought to bar federal agencies from awarding contracts to companies with a record of breaking labor, environmental or consumer laws. President George W. Bush vacated those regulations soon after taking office.

“We strongly opposed the Clinton blacklist regulations,” Mr. Johnson said, “and this appears worse than that.”

On Feb. 2, Senator Susan Collins of Maine and four other Republican senators sent a letter to Peter R. Orszag, director of the White House budget office, saying, “We are concerned that the imposition of these requirements, during a time of significant economic turmoil in the private sector and tight federal budgets, could have serious, negative consequences, especially for our nation’s small businesses.”

One signer was Tom Coburn, Republican of Oklahoma, who was one of the two main sponsors — the other was Senator Barack Obama — of a bill that sought to increase the transparency and accountability of federal contracting by requiring the government to create a data base of all federal contracts. President Bush signed it into law in 2007.

David Madland, director of the American Workers Project at the Center for American Progress, a liberal research group founded by Mr. Podesta, argues the new policy could lower government costs, instead of raising them.

Many low-wage employees of federal contractors receive Medicaid and food stamps, he said. Citing studies conducted by the Department of Housing and Urban Development and by academic researchers, he said that contractors that pay their employees well have greater productivity and reliability, while contractors with a record of labor law violations do shoddier construction work.

“This policy is good for workers, it’s good for taxpayers and it’s good for high-road businesses,” Mr. Madland said.

He said that one study done by the state of Maryland found that after the state began requiring bidders to pay a living wage, the number of bidders per contract rose by a third on average. Some higher-wage companies said they began seeking government bids because the new policy leveled the playing field.

One federal official said the proposed policy would encourage procurement officers to favor companies with better compensation packages only if choosing them did not add substantially to contract costs. As an example, he said, if two companies each bid $10 million for a contract, and one had considerably better wages and pensions than the other, that company would be favored.

Some supporters of the new procurement policy — and even some opponents — say Mr. Obama could impose it through executive order. They assert that the president has broad powers to issue procurement regulations, just as President John Kennedy did in requiring federal contractors to have companywide equal employment opportunity plans.

But some opponents argue that legislation would be needed because an executive order may collide with laws that require federal contractors to pay the prevailing regional wage for the type of work being done. The executive order, they fear, would call for higher wages.